Rupee nears 196 vs dollar in interbank as rout is on

KARACHI: Maintaining its downturn for the eighth consecutive session, the Pakistani rupee continued to tumble against the US dollar and breached yet another important threshold of 195 in the interbank market to hit its new weakest level on Tuesday.
The State Bank of Pakistan said in a statement that the rupee opened at 194.18 against the US dollar in the interbank market and closed at 195.74 after shedding Rs1.56 (-0.80 percent). Within the open market, the rupee was traded at 197/198 per dollar against 195/196 a dollar on Monday last.
The rupee has set six new all-time lows during the last six sessions. The local unit has shed Rs3.21 during the last two days against the US dollar after losing Rs5.90 during the last week. Overall, the rupee has depreciated by Rs38.25 against the US dollar during the ongoing fiscal year 2021-22 and Rs19.43 during the current year 2022.
The local currency’s devaluation comes ahead of Pakistan’s tentative talks with the International Monetary Fund (IMF) in Doha on Wednesday to revive the stalled multibillion-dollar loan programme. The reactionary decline of the rupee comes in light of scepticism in the market. Stakeholders assume the financial watchdog will not agree to the resumption of the programme following the government’s reluctance to implement the prerequisite conditions.
The IMF had earlier directed the government to withdraw subsidiaries on petroleum products and electricity, reverse industrial amnesty schemes and increase the rates of taxes in the upcoming fiscal budget. The industry experts believe the country is desperately in need for the revival of the programme to avoid increasing the risk of defaulting on international payments, specifically on imports and foreign debt repayments.
Moreover, the country’s foreign exchange reserves have depleted to critically low levels, indicating only six weeks of import cover as compared to the usual three-month import cover. The uncertainty resulted in importers panic buying the foreign currency against limited supplies, as exporters opted to delay receiving their payments from foreign buyers on speculation that the rupee may test around Rs200 soon.
The widening gap between demand and supply of the foreign currency has mounted pressure on the rupee. Experts believe that the government should either take tough decisions to deal with the growing economic crisis or announce snap elections. – TLTP